Average CAR of seven recapitalized banks falls

Average CAR of seven recapitalized banks falls

JAKARTA (JP): The average capital adequacy ratio (CAR) of
seven recapitalized banks declined to 11.04 percent at the end of
August from 11.18 percent in July, the Indonesian Bank
Restructuring Agency (IBRA) said in its October monthly-report
issued on Tuesday.

The seven recapitalized banks are the publicly listed Bank
Internasional Indonesia, Lippo Bank, and Bank Universal, and non-
listed Bank Arthamedia, Bank Prima Express, Bank Bukopin and Bank
Patriot.

The agency did not disclose the reason for the decline in the
CAR, but analysts have warned that the capital condition of the
banks would deteriorate further as most of the banks are still
unable to resume their lending activities.

CAR is the ratio between capital and risk weighted assets.

The government via IBRA, a unit under the finance ministry,
helped to fund the recapitalization program of the seven
privately-owned banks in 1998 to lift the banks' CAR level from
negative territory to beyond the minimum 4 percent requirement.
Instead of injecting cash, the government issued bonds to
recapitalize the banks.

The seven recapitalized banks are different from the so-called
nationalized banks because all of the recapitalization costs of
the latter are fully financed by the government.

The government has said that all of the country's banks must
reach a minimum CAR level of 8 percent by the end of next year,
to meet the international standard.

IBRA said that the non-performing loans (NPLs) of the seven
recapitalized banks declined to 22.63 percent at the end of
August from 23.73 percent in July.

The government has also said that banks' NPLs must fall to
below 5 percent by the end of next year.

The agency said that the lending growth rate during the month
was only 1.74 percent compared to 2.47 percent in July.

But it said that the loan to deposit ratio (LDR) increased
slightly to 45.76 percent from 44.97 percent.

Bank Indonesia confirmed last week that lending growth of the
banking sector had been slow due to a combination of internal and
external problems in the banking sector.

The central bank said that new lending in August was only at
Rp 267.61 trillion compared to the Rp 525.40 trillion in total
third party funds it collected.

IBRA also said that the net interest margin of the seven banks
declined to 0.28 percent from 0.31 percent, while the return on
assets was at 0.03 percent and the return on equity at 0.16
percent.

The government has issued more than Rp 400 trillion worth of
bonds to finance the recapitalization of state and major private
banks. The state budget covers the interest rate of the bonds.

More than Rp 150 trillion of the bonds carry fixed interest
rates of 12 percent and 14 percent. Another Rp 218 trillion of
the bonds carry a variable rate linked to the interest rate of
the one-month Bank Indonesia SBI promissory notes. The remaining
amount of the bonds are indexed rate bonds.(rei)